The U.S. Securities and Exchange Commission is investigating Miami Gardens to determine whether city officials violated federal laws in connection with its $60-million general obligation bond issue approved by voters in 2014.

Using the state’s public records law, Florida Bulldog obtained city documents detailing the non-public investigation, including SEC letters asking the city to produce a variety of documents about the 2014 bonds. The most recent SEC letter was sent Dec. 12.

Investors who purchased the bonds were told proceeds would be used to upgrade 18 city parks and technology used by the city police department. But progress on those capital improvement projects has been slow, and records show the SEC is now seeking to learn whether Miami Gardens officials illegally diverted bond proceeds to pay for day-to-day city operations, including employee payroll and expenses of the seven council members.

The city was notified of the probe in a Sept. 27, 2017 letter sent by Scott Lowry, senior counsel in the SEC’s Miami regional office, to Miami Gardens City Attorney Sonja K. Dickens. In his 18-page letter, Lowry requested thousands of pages of financial documents from the city, although he stopped short of accusing Miami Gardens politicians and administrators of any wrongdoing.

“This investigation is a non-public, fact-finding inquiry,” Lowry wrote. “The investigation does not mean that we have concluded that you or anyone else has violated the law.”

However, Hollywood-based attorney Lee H. Schillinger, who specializes in complex securities litigation, told Florida Bulldog the SEC would not launch such an inquiry without some solid evidence.

“The SEC doesn’t do anything willy-nilly,” Schillinger said. “Somebody must have let the SEC know something is going on for the SEC to do this type of investigation with this level of detail. Whether the funds were properly or improperly used is something the SEC has to determine.”

A ‘serious inquiry’

Danny Crew, Miami Gardens city manager from 2004 to 2013, agreed

“The SEC would not be doing this if they didn’t suspect that there could be a problem,” Crew said. “It appears to be a pretty comprehensive, serious inquiry.”

Benson did not respond to individual email and voicemail messages seeking comment. Neither did Vice Mayor Erhabor Ighodaro, or council members Lisa Davis, Rodney Harris, Lillie Odom, Felicia Robinson and David Williams Jr.

Instead, Deputy City Manager Vernita Nelson provided a reporter with an email statement that defended the city’s management of the bond program without addressing the SEC investigation.

“The City of Miami Gardens is dedicated to the effective and efficient use of city resources on behalf of its residents and transparency to ensure confidence in governance,” Nelson wrote. “With regard to the $60 million general obligation bond, the city does this in several ways.”

For one, Nelson wrote, a bond oversight committee made up of residents meets monthly to track the progress on projects and bond expenditures. “This allows the people to review how their money is being spent,” Nelson wrote. “Additionally, information on the progress of bond related facilities is disseminated through a newsletter.”

Furthermore, Nelson wrote, the city’s independent auditors annually reconcile all the city’s functions, including the general obligation bond expenditures. “They also examine whether bond funds have been properly segregated,” she said. “This serves as an extra set of eyes to ensure that all revenue is being handled properly.”

$60-million bond program

Prior to the April 21, 2014 vote, Miami Gardens’ elected officials, including Gilbert, touted the $60-million bond program by promising improvements and new buildings in the city’s 18 parks, as well as new technology for the police department, including license plate readers and surveillance equipment, according to the Miami Herald.

The referendum, done by mail-in ballot, was approved by 62 percent of voters, but only 13 percent of the electorate took part in the referendum. Moreover, the ballot did not include a detailed breakdown of every project that would be built at the various parks or how much each will cost Miami Gardens taxpayers.

Almost a year after the bond measure passed, the council approved a bond implementation plan that was still light on details about specific improvements and still did not spell out each project’s costs, according to city resolutions reviewed by Florida Bulldog. Bunche Park would get a new sports complex with an indoor running track and studios for gymnastics, dance and martial arts. A studio for science, technology, entertainment and math classes administered by Miami-Dade Public Schools is slated for Risco Park. There is also description for a senior citizen center and culinary arts facility with a commercial kitchen and food storage areas.

Last month, as the SEC’s investigation quietly continued, Mayor Gilbert put out a six-page newsletter titled “Your Bond Dollars at Work” with updates on the various bond projects. The costs of those projects was not discussed, nor was there any mention of the SEC investigation.

In fact, no detailed cost estimates are made available until project-related contracts come up for a vote before the city council. Deputy City Manager Nelson provided Florida Bulldog with copies of the bond oversight committee meeting minutes and the city’s bond newsletter dating to June 2016. But neither the minutes nor the newsletters provide financial information or budget costs for the projects.

By contrast, Miami-Dade County Public Schools listed its proposed capital improvement projects and accompanying costs for each school before a 2012 vote for a $1.2 billion general obligation bond and the city of Miami provided an itemized list of 134 projects that would be financed with a $275 million bond before voters approved it this past November.

Meanwhile, the Miami Gardens park improvements have been lagging. The city has completed one project: the renovation of the Bunche Park pool. And only contracts for work at six parks have been approved.

What SEC is seeking

As Miami Gardens struggles to break ground on the capital projects, the SEC is now asking for documentation from the city that would prove officials are not using bond proceeds to cover costs unrelated to the bond program. In his Sept. 27, 2017 letter, SEC senior counsel Lowry requests among other proof:

Documents sufficient to show the actual use of the 2014 Bonds proceeds and whether any proceeds have been used for any purpose or objective not delineated in the June 25, 2014 official statement, including, but not limited to, meeting payroll or personal expenses of city employees.

Documents sufficient to identify each actual or anticipated project to be funded by the 2014 Bonds, including for each such project, the current amount funded, the total amount anticipated to be funded, the current status of the project and the estimated or actual completion date of each project.

Documents and communications concerning transfers of funds or account balances to or from the Capital Projects Fund.

All documents and communications concerning expense reports for the mayor, vice mayor, city council members and the city manager.

Based on the follow-up letter Lowry sent to Miami Gardens City Attorney Dickens in December, the city did not fully comply with the SEC lawyer’s initial request for records. For instance, Lowry informed the city attorney that Miami Gardens did not provide documents and communications concerning the account balances and fund transfers, or city officials’ expense reports. Lowry gave city officials a deadline of Jan. 12 to produce the documents that were not provided, as well as other detailed information including names of vendors, proof of payment to vendors, payment dates and the ledger account to record each transaction.

When asked if the city met the Jan. 12 deadline, Nelson said via email that she did not know. “I will forward your question to the appropriate party,” she wrote on Feb. 6. But Florida Bulldog did not hear back from her or any other city official.

Ex-City Manager Crew, who reviewed both Lowry letters, said Miami Gardens officials need to take the SEC probe seriously. “The SEC got the first production of documents and they didn’t particularly like it,” he said. “My main concern would be to get the answers to them quickly before they get upset.”

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